PROVIDENCE – Citizens Financial Group Inc. on Wednesday reported that 2023 first-quarter business conditions nationwide, and in Rhode Island, have rebounded from the recessionary territory the economy had slipped into during the fourth quarter of 2022.
National business conditions rose to 53.9 in the first quarter on the Citizens Business Conditions Index, reflecting continued strength in the labor market, more new business openings and positive corporate revenue trends. The index had dipped to 49.86 in the fourth quarter last year, just below the 50-value threshold considered expansionary, and the bounce-back during the first quarter signaled a return to positive business conditions.
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Citizens analysts said the labor market has remained resilient despite aggressive Federal Reserve rate hikes aimed at slowing the economy to curb inflation. The Federal Open Markets Committee has raised base rates from near 0% a little more than a year ago to between 4.75% and 5%. The federal funds base rate provides a reference for financial institutions as they borrow and lend from one another. As it goes up, so do prices.
“The U.S. economy bounced back during the first quarter and, despite the disruption in the financial sector, there are several positive signs going forward such as improving inflation measures and still-strong labor numbers,” Eric Merlis, managing director and co-head of global markets for Citizens, said in a statement.
Nationally the number of jobs gained overall was “surprisingly high” despite several much-publicized corporate layoff announcements, Citizens said. The unemployment rate stood at 3.5% at the end of March, according to the U.S. Bureau of Labor Statistics, tied with the 3.5% reported on Dec. 30, 2022.
For Rhode Island, the Citizens Business Index Conditions team said 55% of its commercial banking clients “had revenue that grew quarter-over-quarter during Q1 2023.” Business applications in the Ocean State also were robust in the first quarter, according to Citizens, while initial unemployment claims in the state were flat.
The number of new business applications in the nation also continued to climb, according to Citizens. That aligned with data provided by the U.S. Department of Commerce that showed healthy gains of 4.5% in the number of new enterprises from February to March in 2023. All told, 451,752 new businesses were created across the nation in March 2023.
The first-quarter index indicates “a business environment where activity has adjusted as interest-rate hikes seem to be working to curb inflation,” Merlis said. “The still-strong job market continued to be a source of support during the quarter.”
Consumer services and health care were among the strongest sectors due to their ability to pass on rising costs to customers, according to Citizens. Manufacturing slowed as higher borrowing costs hit expansion by limiting capital expenditures.
“Despite the disruption in the financial sector, there are several positive signs,” Merlis said. “Policy-makers are still trying to thread the needle amid heightened recession concern, but companies that have made it through the pandemic and recent headwinds continue to prove their resiliency.”
The Citizens index is comprised of components drawing on proprietary bank data and from information supplied by the not-for-profit Institute for Supply Management. The categories include the revenue performance of Citizens commercial banking clients, manufacturing, services, jobless claims and national new business openings.
The latest ISM report on manufacturing found that the sector had contracted in February for the fourth consecutive month following a 28-month period of growth. Of the six biggest manufacturing categories, only two – Transportation Equipment and Petroleum & Coal Products – registered growth in February. A similar ISM report released in Feburary indicated that the services sector had grown for 32 of the last 33 months, with the one contraction occurring in December 2022.
Citizens commercial banking clients showed slightly greater success with revenue gains when compared with other businesses across the nation, according to the report.
Sam Wood is a staff writer at PBN. Contact him at Wood@PBN.com.
